OREANDA-NEWS. The US gasoline markets saw a year of weaker prices as falling crude values dragged products lower, but exports remained strong and should continue to surge in 2016.

Gasoline prices generally peaked, regionally, in the early spring and steadily declined over the course of the year. The US Gulf coast's low point came in early December at $1.11815/USG. The New York Harbor gasoline market also reach its nadir at the same time at $1.21485/USG for conventional 87 octane gasoline.

The California market, which was hampered by the loss of ExxonMobil's Torrance refinery for most of the year, was a major price outlier. The price for Los Angeles CARBOB gasoline averaged a 35?/USG premium to the rest of the nation's yearly average of $1.61198/USG.

The overarching trend of weaker prices spurred demand across the nation with particularly strong growth seen for higher octane gasoline blends. This resulted in tight supply of reformate and alkylate, pushing their assessed premiums versus gasoline to all-time highs. Reformate hit a record premium of 83.75?/USG over gasoline in the US Gulf coast in July while alkylate reached a record premium of 59.25?/USG, also in July.

The higher demand for 93 octane gasoline is expected to remain a longer term trend as major refiners announced this year they plan on sinking capital into projects that will help them capture the strong premium than higher octane gasoline can yield. Valero and Phillips 66 are both planning on building refinery units to increase their ability to produce high octane blendstocks while Marathon is expecting to extract more high octane gasoline blendstocks from natural gas plays.

Refinery run rates were strong most of the year with the US average sitting at 91.35pc of total operating capacity, just above 2014's average of 91.16pc.

Arbitrage movements were fairly volatile during the year with the biggest change of fortunes seen in the US Gulf coast to Chicago movements. After being closed most of the spring and summer, the arbitrage opportunity to ship from Houston to Chicago opened in dramatic fashion in early August with Chicago gasoline prices reaching a 65?/USG premium to the US Gulf coast. The arbitrage stayed mostly open at an average of 19.4?/USG until it closed in early November.

The Chicago market was opened to the US Gulf coast because of refinery problems in the midcontinent. This region continues to be a market of opportunity which conditionally pulls supply from the US Gulf coast and away from New York Harbor and the export market.

Gasoline exports remained strong and, based on Energy Information Administration data, 2015 is on course to surpass 2014 levels. From January through September the nation sent an average of 452,000 b/d of gasoline abroad, up from 417,000 b/d sent overseas during January through September 2014. At this pace, 2015 should surpass 2014's daily average of 441,000 b/d and 2013's 373,400 b/d.

The US Gulf coast is gaining in gasoline exports not only because of lower crude prices but also as the result of many Latin American countries failing to invest in needed refinery expansions. This has allowed exports to grow for US refiners while overall demand has declined in Latin America. The rate of demand destruction in Latin America has been outpaced by a growing reduction in refinery output. This trend bodes well for US refiners in the coming years, especially as Mexico continues to open up its energy markets.